Transition Team "Ministry of Justice Reports Plans to Strengthen Punishment for Illegal Short Selling and Expand Stock Manipulation Investigation Unit"

by Lee Kimin

Published 05 Apr.2022 15:46(KST)

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] The Presidential Transition Committee announced on the 5th that the Ministry of Justice has decided to strengthen substantial criminal penalties for illegal naked short selling. The Ministry of Justice also reported plans to reorganize and expand the investigation units for unfair trading practices, including stock price manipulation, not limited to illegal short selling, the Transition Committee emphasized.

Choi Ji-hyun, the chief deputy spokesperson of the Transition Committee, conveyed this during an afternoon briefing by sharing part of the Ministry of Justice's work report from the 29th of last month.

According to the Transition Committee, the Ministry of Justice reported plans to strictly apply laws against unfair capital market trading practices such as market manipulation, increase prosecutors' sentencing demands, and thoroughly recover criminal proceeds.

Additionally, the Ministry plans to establish a monitoring system for illegal short selling and a cooperative investigation framework among related agencies including the prosecution, the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange. To this end, formal institutionalization of the Financial Securities Crime Investigation Cooperation Unit of the Seoul Southern District Prosecutors' Office is also planned. Specifically, the formal institutionalization of the currently non-institutional Financial Securities Crime Investigation Cooperation Unit at the Seoul Southern District Prosecutors' Office will be pursued.

Furthermore, regarding general unfair trading practices such as stock price manipulation, the Ministry of Justice reported plans to expand the investigative organization. The Ministry will establish a "Special Judicial Police Team" within the Financial Market Legal Investigation Unit of the Financial Services Commission and strengthen and increase the number of special judicial police officers at the Financial Supervisory Service to enhance investigative capabilities.

Chief Deputy Spokesperson Choi emphasized, "Currently, there are 16 special judicial police officers at the Financial Supervisory Service, and there are plans to increase this number to 31, with the Ministry of Justice expressing the need to eventually expand to over 100."

The scope of duties for the special judicial police officers includes serious and urgent cases such as those under the prosecution's fast-track status. In addition to cases sent directly to the prosecution without the Securities and Futures Commission's resolution under the Financial Services Commission, the scope will be expanded to include cases reported or requested for investigation by the Securities and Futures Commission as well as cases recognized internally as crimes.

Chief Deputy Spokesperson Choi stated, "The Ministry of Justice plans to implement the reorganization plan for the special judicial police officers in the capital market around the end of April this year."

The Ministry of Justice also intends to strictly apply laws to capital market disruptors, raise sentencing standards, and thoroughly recover criminal proceeds.

In particular, the need to establish a "Criminal Proceeds Recovery Department" and a "Criminal Proceeds Recovery Division" at the Seoul Southern District Prosecutors' Office, which focuses on financial crimes, was also mentioned in the work report, according to Chief Deputy Spokesperson Choi.

Choi emphasized, "Strengthening penalties for illegal short selling and reorganizing securities crime investigations to enhance the effectiveness of sanctions are campaign pledges of President-elect Yoon Seok-yeol. The Transition Committee plans to carefully review implementation measures based on the Ministry of Justice's work report."

Meanwhile, regarding some reports that the Supreme Prosecutors' Office plans to expand the Investigation Information Office, Chief Deputy Spokesperson Choi said, "The purpose of the Supreme Prosecutors' Office work report was not so much expansion as it was a review of reorganization."